“Chairman and CEO of Taiwan Semiconductor Manufacturing Company Morris Chang said on Friday that he expects his company to be responsible for almost all chips built on the 28nm process in 2013, prompting analysts to suggest that the company may have struck a deal with Apple to build the next-generation of A-series SoCs,” AppleInsider reports.

“Chang expects to spend some $9 billion in capital expenditures in 2013 as shipments of chips made on the firm’s 28nm process triple, reports the China Times (via The Next Web),” AppleInsider reports. “The chief executive sees capex rising even further in 2014 as the company moves toward more advanced 20nm and 16nm technology.”

AppleInsider reports, “With claims of a near monopoly on 28nm wafer shipments, analysts predict that TSMC has secured orders from Apple to build the next-generation of the iPhone maker’s A-series chips. Currently, Apple uses Samsung foundries for their chip making needs, though rumors have been circulating that the partnership may soon end.”

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39 Comments

Speaking of Samsung on the down-low I predict too Google and Samsung’s partnership will fracture as a result of Samsung taking too much of the Android profit from Google’s point of view. Samsung is developing their own OS so the signs point to Android becoming more proprietary to Google and maybe the less threatening and aggressive phone companies. Samsung will have it’s own OS driven phones.

I don’t get why it has taken Apple so long to move away from Samsung. They have 120 billion in the bank that they are doing nothing with. Not investing it, not giving it out in dividend. Take 10 billion, pay for the damn fab and get cranking. Apple has often talked about how all this money give them tremendous flexibility but they never use that flexibility.

1) Long-term contracts. Apple is the largest buyer of semiconductor parts in the world. In order to be able to make over 100 million devices each year, it is absolutely necessary to lock-in your suppliers. It is likely that some current contracts with Samsung go back three or four years.

2) Like it or not, for some of the components Apple needs in huge quantities (particularly the ARM chips and high-rezs screens), Samsung is essentially the only supplier in the world that can also deliver on quality and schedule. In order to work around this, Apple has invested billions (yes, that is BILLIONS with a “B”) in companies and facilities in its supply change, but that leads to challenge #3:

3) Contrary to your astonishing ignorant assumptions, you just can’t build a fab overnight, especially with a new supplier. It literally takes years to construct and equip a facility, develop production processes, conduct validation runs, debug yield problems and ramp up to volume. Apple has, in fact, tried to do this with some suppliers (Sharp is chief among them) and the results have not been pretty.

4) Apple is run by mature, intelligent and thoughtful adults. They aren’t going to put their company at risk for components that don’t meet their quality standards, or cannot be delivered in sufficient quantity, or are chronically late. Thankfully, they don’t share your need for instant gratification.

5) The mature, intelligent and exceedingly clever adults who run Apple are also incredibly strategic thinkers. Apple’s supply chain logistics are not just about ensuring that it has components; it is also about denying others access to parts of similar quality and quantity. It is important to disengage from Samsung in a way that doesn’t enable competitors – including Samsung – from taking advantage of newly available production capacity.

Well said, Ralph. I’ve been working in the supply chain side of things in the musical instruments industry (which is *tiny* in comparison to the consumer electronics field) for 20+ years and still go to East Asia every few months. Even with much smaller volumes and products that literally haven’t changed in decades or even centuries (guitars, pianos, violins, etc.), it’s a major undertaking to switch suppliers or contract manufacturers.

I observe Apple’s supply chain operations and it’s absolutely breathtaking. It’s hard to fathom the scale and the level of sophistication involved. I deal with volumes of around few million instruments on an annual basis. Apple puts out that much in a few days of *much more* complex and difficult products.

People tell me they are amazed that I deal with guitar factories that produce a thousand units per day. Well, that really is peanuts compared to Foxconn and others cranking out hundreds of thousands or even millions of units per day. It’s a mind-boggling thing to ponder.

Apple made a deal with Samsung years ago. Apple had to wait this long to get out from that deal. Apple makes decisions that lasts years ahead. Now the good thing is that nobody trusts Samsung anymore so no one wants to use them.

Speaking of Samsung, I read somewhere that inside the advertising budget of Samsung, a huge portion is dedicated to hiring people to work the blogs, comments, bulletin boards, etc. to drag down the Apple brand with FUD and bad publicity. Should we be concerned?
I would like to know more about this type of Gorilla tactics that we seem to be encountering more often.

And don’t forget that outer planet called Uranus, which used to be pronounced exactly how you think I’m pronouncing it. Ages ago the SF Chronicle had this great headline: Astronomers Discover Rings Around Uranus and that sparked the change in pronunciation. Oh, and having grown up with a “classical” (ie we learned a bit of Latin and Greek, but not too much) education, I was horrified when I heard the name of that town in Saskatchewan pronounced “ru jye nuh” (rhymes with vagina) when we learned the Latin as “reh gee huh.”

Doug4less, if you had actually read the post, you would have understood that Jeff was referring to Regina. He only referred to Saskatchewan in passing, as the state in which Regina lay. Do try to keep up, you’ll look less of an idiot in future.

Inquirer is tabloid, so major part of what it writes is made up, and yet another major part is wrong. This article from 2011, and while they keep mentioning “28 nm process”, they actually mean “32 mn process”, which debuted in 2012, indeed.

There is no point to develop two processes that only differ in 4 nm. After 32 mn, Samsung develops 20 nm.

Samsung pre announces a “class” of feature size in its upcoming processes. Samsung almost never gives a specific feature size until the chips are in full productions.

For Example: In late 2012 they announced they were moving their most cutting edge chip production to “10 nm class” processes in 2013. This seemed to be a HUGE jump on Intel which is expected to go to 14 nm feature size in its processes in 2014, with test runs and limited pre production in the second half of 2013. The intent of the announcement was clearly to get people to think, “Wow. Samsung is going to do 10 nm in 2013 while Intel won’t get to 14 nm until 2014 — and Intel’s roadmap is to get to 10 nm in 2016 or 2017. Clearly Samsung is a full generation (and three to four years) ahead of Intel!!!”

After a bit of investigation, it turns out that Samsung *may* be starting limited runs of 18-19 nm feature size processes in late 2013. This is much closer to “20 nm class” processes than “10 nm class” processes, but since 18 and 19 both have a leading “1” rather than a leading “2” Samsung loudly announced moving to “10 nm class” processes.

Absolutely, intentionally misleading. Anything to make the world think that they are the leaders in fab processes. It does not matter that by the time Samsung is in full production on 19 nm chips that Intel (and possibly Micron and others) will likely be in full production on 14 nm chips — just like Intel was in full production of 22 nm chips in 2012 while Samsung was stuck at 32 nm chips.